When Credit History Affects Your Job Search: What You Need To Know Now!

CN_Marc_v1_eAs if job search weren’t bad enough, when you apply for a job there is one more important thing to think about: your credit history. Yet for most people, a bad credit report or financial problems that affect their employment is the last thing on their minds during job search.

But unfortunately, for a growing numbers of employers, a bad credit report can be the main reason they decide not to make you a job offer. Employer background checks, depending on the job requirements and the state you live in, can include credit checks as a standard part of the job application process.

What you need to know about credit and job applications

First, you should know that there are some rules as to what credit information an employer can ask for, and even whether they have the right to do a credit check on you at all. The federal Fair Credit Reporting Act (FCRA, amended in 2003) includes some key protections for job seekers.

Written permission to the employer from the person being investigated is absolutely required. Then again, if you say no, you can probably forget about the job. One interesting FCRA exclusion: “Written consent generally is not required in the trucking industry.”

But you should also know that once permission is given, if you are working for the company, your employer can run another check at any time. This is true even for current employees who are being considered for promotions or reassignment.

FYI … I believe the Fair Isaac credit score (FICO score), is NOT included in the modified employer report (they don’t get the full report you get), which also doesn’t include account numbers or year of birth.

Are employers legally allowed to check credit history?

Although the FCRA requires that an employer should have a sound business reason for doing a credit check, there are probably ways for employers to stretch the concept of business reason. A sound reason would be handling money or company finances.

But cases can be made for legitimate business purposes if the potential employee is handling data that relates to company finances, or perhaps is privy to confidential business strategies. Managers are generally subject to this credit check practice.

But certain states offer even more protection, including the amounts of money being handled that would constitute a sound business reason. So check with your local or state consumer protection agencies or your attorney general’s office.

As far as I know, at this time the states with additional restrictions on employer credit checks are California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington.

What if you are denied a job because of your credit?

If the credit report is the reason, the employer owes you an explanation and (I believe) a copy of the information they based their decision on. But, of course, an employer could always just say they rejected you for other reasons. Not legal for them to do that, but you’d have to prove it.

If you suspect you are being unfairly denied without proper disclosure, you can contact the agencies I mentioned earlier: local or state consumer protection agencies or your attorney general’s office.

If you have been denied a job because of your credit, it’s important for you to make sure the information is accurate. Credit reports contain errors more often than they like to admit. You have a right to show there’s been an error. There can also be circumstances that are not a reflection of the way you normally operate; credit problems do not in and of themselves mean the employee is not trustworthy.

You have a right to explain any discrepancies or extraordinary circumstances that may change the way the employer views your history. That said, a sketchy credit history with continued defaults and large amounts of outstanding debt can be a legitimately valid signal to the employer for caution on many levels when it comes to how you’d handle the job.

So if there are some real credit issues in your reports, have a really good story explaining steps you’ve taken to turn things around!

What you need to do right now

Your credit report is an essential part of your job search. Whether you are looking for a job or not, I strongly advise you get a copy of your free annual credit report right away – if you haven’t already done so in the past year. Your credit score can even affect your chances of getting a promotion!

The three agencies that pretty much control the credit report market are Equifax, Experian and TransUnion.  You can go to AnnualCreditReport.com once a year to get your truly free credit report. Other sites might claim to have free reports, but this is the site that gives you the annual reports you’re entitled to by the amended FCRA.

Make sure to look at a report from EACH company, since they are not the same. I know that seems stupid, but one company can contain an important error that the others don’t have – and yet that one error can get in the way of your job offer.

Oh … and if you are unemployed but expect to apply for employment within 60 days, you are entitled to a free report even if you asked for one within the past year.

Why do I say get your reports right now? You have a right to notify the credit reporting agencies of errors and get them resolved. Anything you can clean up ahead of time is one less thing to deal with when you are focusing on what really matters, getting your new job!

Do you have a job search credit story to share? Any additional credit history advice to help job seekers?

More articles you might enjoy:

♦   The Real Scoop on How to Apply for Jobs Online

♦   Do Employers Really Check Work History and References?

♦   Job Applications: What Happens AFTER You Apply for a Job

♦   Where to Begin a Job Search: Getting My Job Search Started